Morningstar’s Retirement Quiz for Advisors: Research to Help Drive Your Plans

Do you know what can make the difference for reaching your clients’ retirement goals?

May 07, 2019

Samantha Lamas

Online financial-planning tools have made it easier to see how a
client’s existing financial plan can make or break their retirement
goals and to identify where adjustments may be necessary. As advisors
know, however, moving a few sliders on a software page is different
from actually implementing those changes. And when it comes to impact,
not every strategy is created equal.

Over the last few months, we’ve conducted in-depth research about
several aspects of retirement: the various investing techniques
individuals use to work toward their retirement goals, the
effectiveness of these techniques, and the current state of retirement
in the United States. This research suggests that even the most
advanced online tool can’t erase a client’s retirement woes; rather,
most investors need unique advice that is personalized to their
behavior and financial lives.

To help both advisors and clients build a better understanding of
how to reach their financial goals for retirement, we compiled our
findings in the Morningstar Retirement Quiz for Advisors.

Here’s an overview of some of the topics this quiz tackles.

What moves the needle on retirement-planning success?

Research by Steve Wendel, head of behavioral
science, took a closer look at the effectiveness of common
financial-planning tactics, such as increasing contribution rates,
using various asset-allocation strategies, and delaying retirement.

The research suggests that a combination of several smaller
behavioral changes can be more effective in achieving retirement
success than extreme actions related to any single technique. For
example, if Americans delayed retirement until at least age 67 and
contributed a minimum of 6%, the percentage of American households
that would be financially prepared for retirement would increase from
25.6% to 71.2%.

However, since the right combination of techniques can vary
significantly depending on an investor’s unique situation,
professional advice can be extremely valuable in helping identify
their appropriate strategy.

How realistic are investors’ retirement plans?

Research by David Blanchett, head of retirement
research for Morningstar Investment Management LLC, suggests that
despite the effectiveness of online planning tools in projecting the
likelihood of reaching one’s financial goals (shown in Blanchett’s
study of 58,000 users of Morningstar® Retirement ManagerSM
Managed Accounts), the tools may be unrealistic if their results are
based on incorrect assumptions.

For instance, Blanchett analyzed the 12 waves of the University of
Michigan’s Health and Retirement Study (each of which surveyed about
20,000 Americans who reached retirement age during their respective
study period) to understand how individuals’ actual retirement age
compared with their planned retirement age. This analysis uncovered
that most people retire four years later than they had originally
planned, and this difference can drag down a person’s probability of
reaching their retirement goals by about 40 percentage points for some ages.

Combining what’s effective with what’s realistic

Our Retirement Quiz for Advisors and their clients
features information on findings like these, with the aim of helping
advisors digest this data and introduce the topics to clients.

The quiz can help you understand the different factors involved in
retirement planning so you can start developing ideas about how to
best help your clients.

Test your knowledge with the Morningstar
Retirement Quiz for Advisors.

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informational purposes only. The information, data, analyses, and
opinions presented herein do not constitute investment advice, are
provided solely for informational purposes, and therefore are not an
offer to buy or sell a security. Before making any investment
decision, please consider consulting a financial or tax professional
regarding your unique situation.

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